What Rising Housing Prices Has Done To Home-ownership
28 August 2015
When they grow up and want to be independent, young adults usually plan to buy their first home, preferably by the time they reach 25. Back in the late 1960s, this was the norm, with many young adults taking their first step onto the property ladder.
According to the Office for National Statistics, the average price of a first home cost just £4000. Now, of course, many wouldn’t even believe an estate agent if they quoted that price to a home owner, as new statistics report that house prices have increased by 5225% in nearly a half century later, with the average price looking to be around £209,000. In another report conducted by the Council of Mortgage Lenders, just 8% of 25 year-olds make it on to the property ladder. Staying on the property ladder, though, is another story altogether.
Housing prices have noticeably rocketed, and this doesn’t help those who are looking to afford a new home on an income that fails to match the housing market. Duncan Stott, who is the director for the affordable housing campaign PricedOut states that ”buying today requires your income to be in the top 20% of earnings and a willingness to take out unprecedented levels of mortgage debt.” so many today who are looking to purchase a new home will be needing a bigger wallet and will be relying on a mortgage that can almost inevitably put a home owner in debt. It seems that the generation of home owners today will have a tough time of breaking into the property ladder than ever before.
In 1980, the then Prime Minister of Britain, Margaret Thatcher, implemented the Right to Buy legislation. This gave tenants living in council housing the right to buy their home if they so wished. During this time, the scheme proved popular, with thousands buying into it and apparently prospering from it. This legislation was purported to be a response to rising incomes. But today, the trend has reversed, and the boom in housing prices has exceeded the rise in income, in effect forcing many to re-evaluate their options to buy a home. The Chartered Institute of Housing has even shown in recent statistics that 28% of those aged between 22 and 30 years of age have been forced to remain at their family home or move back to live with parents. It also reports that home-ownership among 25 to 34-year-olds has plummeted from 67% in 1991 to 26% in 2013. it looks as if there is no light at the end of the tunnel for younger home owners.
However, the government today have noticed the issue at hand and are assisting in mortgage guarantees with the Help to Buy scheme. The older generation of home owners are also lending a hand, in giving money to their children or even grandchildren to help buy their own homes. While it looks as if housing prices will never stop rising, there will always be solutions to counter it, meaning there will be an aid to those of the younger generation who wish to buy their own home.